Investing in cryptocurrencies is risky. We can eliminate one of the main risks that investors face by relying on a secure and fraud-free investment platform. Here we analyze Coinbase and explain why, in our opinion, there is no need to fear any type of scam with them.
What is the security of Coinbase?
It is considered one of the safest cryptocurrency exchanges in the industry. It has multiple layers of security that make it very difficult to steal cryptocurrencies and tokens. Additionally, it has deposit insurance that covers all digital and fiduciary assets in user accounts.
It also has a secure vault service to add more security for the user. This service has a transaction verification system by email. In addition, the transactions have a settlement time of two days, in case there is any type of unauthorized transaction or transfer.
Coinbase stores up to 98% of digital assets in a “cold storage” system. This is nothing more than saving the private keys on a device not connected to the internet to avoid possible hacks and theft of assets. A custodian system that is recommended to all users holding cryptocurrencies.
Physical copies of private keys without an internet connection are stored in safe deposit boxes distributed all over the world. Assets are divided so that, in the event of a security breach, the hypothetical theft of assets is minimized.
Theft of exchange customer data can also pose a risk to users. Stealing login credentials or payment information can be a big problem. To avoid this, Coinbase encrypts and stores this information outside the network. They make a backup copy on paper and on storage devices, which are also distributed around the world and deposited in safe deposit boxes.
Mandatory two-step verification
To increase user security and prevent unauthorized intrusion into the user’s account, Coinbase enforces a 2-step verification system. This ensures that an unauthorized intrusion is highly unlikely.
Said two-step access method can be secured through an authentication application such as Google Authenticator or through a code that is sent by text message to our phone number added to our account.
As we have indicated before, the possibility of storing digital assets (in whole or part) in a “vault” wallet is offered. This system is a custodian of assets in a cold wallet, which is not connected to the network until a transaction is requested. For the transaction to be executed, you must wait for at least, 48 hours, for security.
A period of 48 hours is established in case the user’s account has suffered a security breach. Coinbase will send a message to the user’s email confirming that this operation has been requested. This allows the user to report a security breach (if any) and void the transaction. Thus, the client of this exchange will not lose the assets at any time.
The exchange takes security very seriously, but even more so when it comes to working with companies in the financial industry. Coinbase has a background check system for its workers, encryption of storage units, and cutting-edge security features.
Coinbase is respected by financial institutions, hedge funds, and investment firms for its strong security measures.
Despite the gigantic security measures of the exchange, asset theft is always likely. Coinbase for digital offers coverage insurance at no cost to platform customers. Trust assets, on the other hand, have FDIC deposit protection coverage of USD 250,0000 USD per account.
USD Coin (USDC), Coinbase’s stablecoin
Stable cryptocurrencies or stablecoins are those whose price is linked to fiat currencies, precious m,etals, or based on complex algorithms. USD Coin (USDC) is the stablecoin developed by Coinbase for its exchange platform. Each USDC unit is backed by 1 physical dollar, at least in theory. Additionally, USDC holders within the Coinbase exchange can earn rewards for holding this stablecoin.
Its main characteristics are:
- Stable price: Clients who have dollars in their account can exchange them for 1 USDC in a ratio of 1:1. In addition, it is a safeguard for when there are strong price movements in the cryptocurrency market.
- Asset-Backed: All USDC is backed by a dollar or an objectively priced asset. These are stored in accounts of different regulated financial institutions in the United States
- Based on Ethereum: USD Coin tokens work within the Ethereum blockchain. What this allows is to store them in any wallet compatible with Ethereum. Additionally, it allows it to be used in decentralized finance and by other exchanges.
- Global transactions: Designed to allow you to send dollars around the world quickly and easily. In addition, it allows users to save a lot of costs by transacting their money.
USDC is currently available on the exchanges: Binance, BitMart, KuCoin, LAToken, Kyber Network, OKEX, Bitfinex, Uniswap, and KuCoin, among others. We can also use USD Coin in payment gateways and platforms: Bitpay, Ledger, Nexo, or Compound, among others.
Coinbase IPO (IPO COIN)
One of the great milestones of Coinbase took place on April 14, 2021, when the exchange began trading on the Nasdaq. The US tech stock exchange ruled on a price of $250 per share. This assumed the exchange would be worth $65.3 billion in value on a diluted basis.
Coinbase opted for a direct listing on the market instead of launching an initial public offering, which is usually the conventional way. Instead of first selling the shares to institutional investors, they decided to put all of them on the market directly and make them tradeable.
Positive and negative aspects of Coinbase
Let’s see, in summary, what are the positive and negative aspects of the exchange. This will allow us to evaluate more clearly whether or not we are interested in operating on this exchange platform.
- Security: We can unequivocally state that Coinbase is the most secure exchange today. The platform forces users to verify in two steps, something that allows adding security. Over 98% of digital assets are in a cold wallet and it has insurance for digital and fiduciary assets. In addition, it offers a secure vault with delayed withdrawals in the event of a security breach in the client’s account.
- Simple interface: The exchange has been developed to be used by any user, regardless of their knowledge of cryptocurrencies. It allows buying and/or selling cryptocurrencies, transacting with them, storing them, and simply exchanging between cryptocurrencies and tokens. All through a very simple and easy-to-use GUI.
- Information and support: Something very interesting about this exchange is that it has a very good customer service system. It also has an information system for users who are starting in this field.
- Payment Options: Coinbase has a plethora of payment options, ranging from bank transfers to credit/debit cards and even PayPal. The exchange accepts the main payment systems, facilitating access to the acquisition of cryptocurrencies.
- High liquidity: It offers us high liquidity, so we should not have problems when acquiring or operating them. It also allows investors to be protected from market movements, which can occasionally be quite abrupt.
- Operation costs: The Coinbase exchange is currently the most expensive, this is something evident. This platform is the one with the highest fees and differences in terms of fiat to crypto and crypto to crypto transactions, within the industry. Many users acquire the assets in this exchange and transfer them to other platforms, to save a large part of the commissions.
- Regulations: Although for some, complying with the regulations of different countries and government agencies is positive, for others it is not so positive. Bitcoin was born with the idea of offering privacy to users, something that breaks with the KYC-AML processes. This makes the fact that Coinbase has such rigid verification measures and complies with different government regulations, it is not well seen by many users who want more privacy.
- Limited listed assets: This exchange currently offers access to different cryptocurrencies and tokens, but not all of the available ones, not even all of the ones that could be considered “popular”. Coinbase offers access to a limited number of cryptocurrencies and tokens and listing new ones is often difficult.
- Trading cryptocurrencies: The simple version of the exchange has limited analytical tools. Those who want to perform trading tasks depend on data and tools external to the exchange. Coinbase Pro indeed offers more trading capabilities, but it is still more limited than other platforms in the segment.
- Users do not control their private keys: Like all centralized exchanges, it offers us a public address, but not the private keys. The cryptocurrencies that we acquire on Coinbase are at all times under the control of the exchange. The user has no control over their assets, something that goes against the essence of cryptocurrencies. Of course, the user can send the cryptocurrencies to their wallet.
Interest in DeFi by Coinbase
The growth of decentralized finance or DeFi has sparked many interests within the industry. Coinbase has been one of those that have shown interest in this growing sector.
For those who still do not know what DeFi is, they are new platforms that seek to bring conventional financial solutions to the cryptocurrency space. They are based on the decentralization and security offered by blockchain technology. In addition, they allow users to obtain passive income by “lending” their tokens through liquidity pols. If you want to know more about what DeFi is and how it works, we leave you an article about it
Coinbase Wallet, the exchange’s smartphone app, allows us to earn interest through DeFi products. Through this application,n we can earn returns of up to 6% per year. To date, this service required access through Coinbase’s browser DApp or a desktop through WalletLink. The integration of this system within the smartphone application makes everything easier. Users can now add their assets to a liquidity pool by simply pressing a button on their smartphone.
Final Words on Coinbase
This exchange is characterized by being very simple to use and offering great security measures to prevent improper access to our account. Coinbase offers a very simple GUI suitable for any user, regardless of their knowledge. Then we have Coinbase Pro, for users who want to opt into trading and who have advanced knowledge in asset trading. They even offer a version for financial institutions, such as Coinbase Prime.
The big objection that Coinbase and the vast majority of centralized exchanges have is that we have to go through KYC-AML processes. Bitcoin and the rest of cryptocurrencies are based on the privacy of the user, something that breaks when passing processes where we must verify our identity. This is why centralized exchanges are highly criticized because they eliminate privacy and give information to governments about user operations.